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Monetary policy effects on wage inequality: evidence from Italy

Author

Listed:
  • Elton Beqiraj
  • Stefano Di Bucchianico
  • Mario Di Serio
  • Michele Raitano

Abstract

This study examines the impact of monetary policy on wage inequality in Italy from 1999m1 to 2018m12, using a newly assembled dataset based on high-frequency administrative data on private-sector employees from the Italian Social Security Institute (INPS). By applying the Smooth Local Projection (SLP) method, we derive the impulse responses to exogenous monetary policy shocks of average wages and of the Gini index of wage inequality and other indicators of the wage distribution. Our findings show that expansionary monetary policy significantly reduces wage inequality while stimulating economic activity. Furthermore, distinguishing workers’ subgroups according to sector of activity, occupation and firm’s size, we find that expansionary monetary policy decreases wage inequality both 'between' and 'within' subgroups

Suggested Citation

  • Elton Beqiraj & Stefano Di Bucchianico & Mario Di Serio & Michele Raitano, 2024. "Monetary policy effects on wage inequality: evidence from Italy," Department of Economics University of Siena 912, Department of Economics, University of Siena.
    • Handle: RePEc:usi:wpaper:912
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    Keywords

    Monetary policy shocks; Wage inequality; Italian data; Earnings heterogeneity; Labour market;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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